1. Field of the Invention
In general, the present invention provides a method, system and program product for determining funding options for an outsourcing project. Specifically, the present invention addresses funding for any incremental investments required by a client for outsourcing one or more business processes.
2. Related Art
In business it is becoming increasingly common for organizations to outsource various business processes to third party outsourcers. Some business processes that are now regularly outsourced include contact centers, accounting operations, human resources services, procurement, etc. This recent trend of outsourcing business processes has been largely caused by the ever increasing requirements in terms of infrastructure and resources to perform such business processes. To this extent, three types of outsourcing commonly practiced are Business Process Outsourcing (BPO), Business Transformation Outsourcing (BTO), and Information Technology Outsourcing (ITO).
Under BPO, an outsourcer assumes responsibility for performing one or more business processes that were previously done by the client or another outsourcer. Business processes targeted for this form of outsourcing are seldom core business processes of the client. For instance, accounting and human resources are not core business processes unless the client generates its revenue primarily through its accounting or human resources services. When outsourced, the business processes are typically changed only slightly, if at all, but lower labor rates generally enable an overall reduction in the cost of performing the business processes. Information technology (IT) may or may not play a significant role in reducing the cost of the outsourced business processes.
Under BTO, business processes are also assumed by an outsourcer, but the business processes themselves may be substantially changed—often through IT and business process redesign (as will be further described below). Furthermore, the business processes being outsourced may be core or non-core process. For instance, to a web-based retailer, shipping is a core business process that is usually outsourced because the outsourcers have more advanced technology and much larger scale. Likewise, to a telemarketer, its Customer Relationship Management (CRM) is a core business process that may be amenable to transformational outsourcing. In such cases, the business transformation goes beyond just cost reduction. The outsourcer may be able to provide substantially higher service levels, such as fewer lost calls, shorter hold times, faster handle times, and higher problem resolution rates. A transformational outsourcer may also be able to drive a change in the client's business strategy, for example, by serving global rather than just national markets. Furthermore, the outsourcer may be able to enhance the client's financial condition, for example, by acquiring some of the client's assets and hiring employees that it no longer needs to perform the processes.
As mentioned above, BTO deals virtually always include elements of ITO, which itself typically includes the data center, desktop computing, networking, and application management. Like BTO, ITO deals are often large, extremely complex transactions. Moreover, BTO thus may involve thousands of employees and business partners at hundreds of sites around the world. Likewise, hundreds of millions of dollars worth of assets may be involved. Even if the outsourcing transaction is smaller financially and limited to one country, other dimensions of the transaction, such as computers, software applications, and communication networks, may be quite complex. Moreover, if an objective of outsourcing is to move from a lagging to industry-leading business processes, the amount of change required can be large—including office redesign, replacement of equipment, and retraining of staff in the new business processes. Therefore, the necessary investment for a successful transition to outsourced business processes can appear large, especially if the client's business is under stress.
Although the ultimate business benefits of an outsourcing agreement are often readily evident over time in the form of reduced cost, increased revenue, and increased customer/employee satisfaction, the client investment in the transition project itself can be a substantial barrier to attaining those benefits. Particularly, when the primary motivation for outsourcing is cost reduction, the client's business may be unable to justify the investment—or even qualify for financing—thereby remaining locked in an uncompetitive and declining position. This is especially the case when the cost of outsourcing business processes exceeds the current cost for performing those business processes at the client.
Known solutions to this problem are for the client to (a) fund the project with a budget from within, (b) obtain financing via a third party loan, or (c) if the client firm has a separate financing division, obtain financing from such an internal source. However, none of these existing solutions directly involve the outsourcer, and therefore seldom are integrated into the business case or the terms of the subsequent BPO/BTO agreement. From the client's point of view, this can be a disadvantage because the outsourcer has (a) little or no ability to help the client obtain favorable financing terms and (b) minimal incentive to plan and perform the project in a manner that leverages the funding.
In view of the foregoing, there exists a need for a method, system and program product for determining funding options for an outsourcing project. Specifically, a need exists whereby any costs involved with outsourcing business processes can be addressed as part of the outsourcing agreement process.